Gains from Trade with Variable Trade Elasticities

International Economic Review, vol. 60(4), November 2019, 1619-1646.

56 Pages Posted: 4 May 2023 Last revised: 8 Jun 2023

See all articles by Wyatt Brooks

Wyatt Brooks

University of Notre Dame

Pau Pujolas

McMaster University

Date Written: January 1, 2019

Abstract

We measure gains from trade in multi-sector economies with non-homothetic preferences where changes in trade costs generate reallocation of expenditure across sectors. We show how to measure the trade elasticity and how it relates to welfare. In this environment, the trade elasticity now varies both across countries and with levels of trade costs. In an application, we find that the trade elasticity varies substantially across countries and that the gains from moving from autarky to observed trade are on average between 24% and 28% greater than in a model where the trade elasticity is constant.

Keywords: welfare gains from trade, variable trade elasticity, trade composition

JEL Classification: D11, D60, F10, F11

Suggested Citation

Brooks, Wyatt and Pujolas, Pau, Gains from Trade with Variable Trade Elasticities (January 1, 2019). International Economic Review, vol. 60(4), November 2019, 1619-1646., Available at SSRN: https://ssrn.com/abstract=4426681 or http://dx.doi.org/10.2139/ssrn.4426681

Wyatt Brooks

University of Notre Dame ( email )

361 Mendoza College of Business
Notre Dame, IN 46556-5646
United States

Pau Pujolas (Contact Author)

McMaster University ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
13
Abstract Views
221
PlumX Metrics